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Saturday, June 21, 2008

POS Malaysia: ACA Probe

On Friday, June 20, Malaysia Today carries a potentially explosive piece about the ACA Probe on POS Malaysia here - http://www.malaysia-today.net/2008/content/view/9041/1/

A day later, Saturday, June 21, The Star carries another version of the same story (ACA Probe) here - http://biz.thestar.com.my/news/story.asp?file=/2008/6/21/business/21618138&sec=business

It's an eye-opener, and a stark contrast in what was pointed out between the 2 articles! Let me start first with MT's story as this is the earlier article. As usual, I will reproduce both articles for your easy reading, with my own comments at the point where I want to comment in bold, italics brackets preceded by "Seng comment:".


What is Najib’s role in the Gading Sari Aviation Services scam?

The question that begs an answer is (1) how could Gading Sari Aviation Services get a contract from Pos Malaysia when it does not even own any aircraft plus it was the highest bidder? And (2) who was it that forced Pos Malaysia to reinstate the contract after it was terminated on 31 March 2008?


Malaysia Today

Pos Malaysia Bhd acting managing director and group chief executive officer, Datuk Abu Huraira Abu Yazid, confirmed that on Wednesday, 18 June 2008, the Anti-Corruption Agency (ACA) raided the company's premises. "We cooperated with them fully. We have nothing to hold back or to hide," he told reporters after the company's annual general meeting the following day.

Abu Huraira said that it is just a ‘general investigation’ but admitted that the ACA had confiscated some documents relating to the investigation. However he was not in the office when the ACA raid was conducted so he does not know more than that.

Abu Huraira did not reveal what the ACA raid or investigation was about. But he did confirm that Pos Malaysia is reviewing its contracts with Transmile Group Bhd and Gading Sari Aviation Services Sdn Bhd. The contracts for both these companies expire at the end of March next year.

What Abu Huraira did not reveal, though, was that Gading Sari Aviation Services Sdn Bhd’s contract had, in fact, already been terminated on 31 March 2008 but then Pos Malaysia received instructions from the Deputy Prime Minister’s office to reinstate the contract -- so he is not really telling us everything.

Abu Huraira added that the review of the two companies’ contracts was based on their performances. "We have an arrangement with them to handle our business in Sabah and Sarawak. We are now re-evaluating their performance before making a decision," he told reporters. (Seng comment: After reading RPK's article in full, one has to wonder if the contract review is ever based solely on performances, or some other hidden criteria. You and I know there is always something else isn't it?)

Gading Sari Aviation Services is a helicopter rental company owned by Tengku Abdullah, the son of the Sultan of Pahang. Tengku Abdullah owns 750,000 shares in the company while Raja Mufik Affandi Bin Raja Khalid owns 250,000 shares and Md Ismail Bin Abdul Kader the balance 4 million shares. Raja Mufik and Md Ismail are both Directors of the company.

The question that begs an answer is how could Gading Sari Aviation Services get a contract from Pos Malaysia when it does not even own any aircraft plus it was the highest bidder? And who was it that forced Pos Malaysia to reinstate the contract after it was terminated on 31 March 2008? According to the talk in Pos Malaysia, the phone call came from the Deputy Prime Minister’s office?

Transmile Group Bhd, on the other hand, is an air cargo operator, which made the news last year for alleged financial irregularities amounting to RM700 million. Pos Malaysia holds a 14.99 percent stake in the troubled Transmile Group Bhd, which has debts to the tune of RM535.8 million. Abu Huraira said that Pos Malaysia does not intend to reduce its stake in Transmile Group Bhd. "The issue does not arise at the moment. We must give Transmile time to turn around its operations and improve the financial position." (Seng comment: I haven't thought of it before, but now that RPK mentioned it, it does beg the question - why didn't POS disposed of TRANMIL much earlier when prices were much higher and funds were selling as fast as they could? At its peak, TRANMIL share price was over $15 at the start of 2007, and nearly 1.5 year later, last Friday, closed at $1.33. POS should have had many opportunities to dispose TRANMIL at much higher prices. Strange.)

And the question that begs an answer here is have those who committed the criminal act of misappropriating the company’s money been brought to book or will Pos Malaysia have to eventually write the investment off and treat the entire episode as a misadventure at the expense of the rakyat? And what was the role of Pos Malaysia’s then executive chairman, Tan Sri Zainol, in the decision to award the contract to Transmile Group? It would be good if we can also find out the link with Megantara Air, an Indonesian company owned by Daniel, Tan Sri Zainol’s son-in-law.

Let us hope the ACA investigation shows some results and not end up as a NFA (no further action) like so many other scandals involving those who walk in the corridors of power. In the first place, both these companies are not qualified to get these contracts plus their prices were the highest. (Seng comment: RPK's full article did not provide more details, apart from this general claim that their prices were the highest. Personally, I don't yet know if this is true or not. If true, it does not bode well for TRANMIL since despite the POS "hand-out", it still makes losses!)

Then, when Pos Malaysia does the right thing by terminating Gading Sari Aviation Services’ contract, someone powerful in the corridors of power instructs them to reinstate the contract. The ACA investigation should not stop at Pos Malaysia. It should extend to those who walk in the corridors of power, to the Prime Minister’s and Deputy Prime Minister’s office if need be.

Pos Malaysia is losing millions of Ringgit. (Seng comment: Whilst this was true for 12 Months Ending 31/12/2007 when POS reported a loss, it is not actually true for the latest Quarter Ending 31/3/2008.)

And now we hear that Pos Malaysia has been given the task of refunding the RM625 to each car owner eligible for a rebate. And we also hear that RM1 billion has been handed over to Pos Malaysia for ‘safe-keeping’ to meet the cost of these rebates. Are we going to hear of another scandal involving misappropriation of funds a couple of years from now when the ACA discovers that fictitious payments have been made to ‘ghost’ car owners? Thus far there has been too many incidences of wrongdoings in Pos Malaysia to make us think otherwise. (Seng comment: This is a natural question to ask, in light of the large, large, large TRANMIL losses last year.)

Seng comment: Personally, I find RPK's article interesting yet puzzling - perhaps because there are still many missing pieces in my own mind. What connection does the ACA probe has with either Gadang Sari Aviation or Transmile? If Gadang Sari is indeed connected to Najib as RPK hinted, why would the supposedly BN controlled ACA probe POS? Is the ACA probe a warning to the new POS management that they should not repeat their stunt in terminating Gadang Sari's contract last 30 March 2008? Or is the purpose to remove documents? Did ACA really take away documents as RPK alleged here, since the Star article below said that ACA didn't take away documents. But why would the Star article says the ACA didn't take away documents but made copies? Is the Star article written in response to RPK's article a day earlier in an indirect manner? I personally don't like the way these games are being played over the MSM ...

Also, is there a connection between the previous resignation of POS MD and Group CEO Dato' Idrose and the termination of Gadang Sari's contract on 31 Mar, 2008?

At the moment, I don't know the answer. Suffice to say that if I was an investor, I would avoid both POS or TRANMIL.


Ok, the Star version now, which is published a day later after MT's article.

Pos Malaysia: Resignations, ACA probe not linked


PETALING JAYA: Pos Malaysia Bhd says the Anti-Corruption Agency (ACA) probe is not linked to the resignations of its former managing director and group chief executive officer (CEO) and chairman of the board.

(Seng comment: Wow. Already, from the Title and the First Sentence, POS denies that ACA probe is not linked to the former MD & Group CEO resignation. As a reader, I am curious now. Why is there a need to deny this? Guilty conscience?

Looking at Bursa Announcement, I noticed that POS did announce the resignation of Idrose on 5 May, 2008. Reading the actual media announcement, I find it interesting that it was silent on the effective date of the resignation. Instead, it announces Abu Huraira's appointment as Acting MD & Group CEO to replace Idrose. Usually one would expect a different sort of announcement, if the resignation was planned in advance.)

The government-linked company issued the statement following a visit by ACA officers to the Pos Malaysia headquarters on Tuesday. (Seng comment: A minor point, but RPK says Wednesday, 18 June, Star says Tuesday, 17 June. Which is correct? Which article can be better trusted? Neither? Or ACA visited POS twice - both 17 and 18 June. But if twice, why didn't either MT nor Star mentioned that it is twice i.e. Tuesday AND Wednesday? Very puzzling indeed.)

According to the statement, acting managing director and group CEO Datuk Abu Huraira Abu Yazid had met two ACA officers then and assured them the company would give its full cooperation. (Seng comment: Another minor point, but RPK quoted Abu Huraira as saying that he wasn't in office when ACA came on 18 June, and here, the Star quoted Abu Huraira as saying that he met 2 ACA officers when they came on 17 June. Perhaps ACA did visit POS twice on both 17 June and 18 June?)

No files or documents were taken out of the office. However, photocopies of some relevant documents were provided to the ACA at their request,” the statement said. (Seng comment: Again, a third anomaly. RPK said ACA took away documents, whereas Star says No Documents were taken. Who is right? Do you like what you're reading here?)

Huraira said in the statement: “Pos Malaysia welcomes the ACA probe. We will continue to extend our fullest cooperation to the ACA or any other relevant authorities.

“We wish to reiterate that Pos Malaysia pursues a rigorous corporate governance culture and this is detailed in our Annual Report 2007.” (Seng comment: A side comment, but I would like to take this opportunity to remind readers not to blindly trust Annual Reports, since they are almost always marketing pieces produced by company to self-promote themselves and their stock).

An analyst with a “neutral” call on the Pos Malaysia stock told StarBiz that market sentiment on the counter would be affected due to the probe, which was “not really a surprise.”

Apart from that, investors were disappointed with the stock as Pos Malaysia had not been able to generate a good return on investments despite having “a huge cash pile.”

The investment in Transmile Group Bhd, in which Pos Malaysia still holds 14.99%, “just reflects that they actually have not delivered,” the analyst said.

“We are expecting an allowance charge for Pos Malaysia this year from the Transmile investment and, analyst consensus is not good.”

Another analyst with a “buy” call on the counter said since there were no findings yet from the ACA probe, there was speculation as to whether it was a routine check or a more serious investigation.

(Seng comment: I wonder who is this "another analyst with a buy call" ... What would be the odds of ACA making a probe due to "routine check"? Especially when there is a possibility that maybe ACA visited POS twice on June 17 (Star claim) and June 18 (RPK claim). Two "routine checks"?? Hmmnn ...)

However, judging from the share price movements, if there were any seriously bad news, it would have been reflected in the price by now, he said.

Risk factors for Pos Malaysia continued to be higher staff costs, he added.

Meanwhile, in the same statement, Pos Malaysia said it wished to clarify that there was no conflict between the company or its board with major shareholders with regard to any award of contract or the “disposal” of the company's land in Brickfields as reported.

(Seng comment: Hmmnn ... not sure I like this clarification by POS. Why raise award of contracts in the first place? Is this another sign of guilty conscience? Is this in response to RPK's earlier article regarding the contract award to Gadang Sari & Transmile? If they are indeed talking about Gadang Sari and Transmile contract award, then, why divert and point to conflict with company vs shareholders, when RPK's claim is that POS siphons money out legally via high prices?)

“The company has not disposed of the Brickfields land or any other land or property,” it added.
Also, it said, the Transmile contract had expired on March 31, 2006 and not terminated as reported.

Pos Malaysia subsequently called for an open tender and 10 companies bid for the contract in 2006.

(Seng comment: I'm puzzled by this statement. Surely, POS, as a huge organization, would have given out many contracts. Why talk about the contract awarded in 2006? Is it trying to convey the impression that just because it did award one contract on open tender basis, we are supposed to ass-u-me that all contracts follow the same open-tender basis? Surely the Star doesn't think investors are that naive?)

“A full tender process was duly adhered to and the new contract was tendered based on block space as opposed to block hours under the previous contract,” the statement said.

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